On a reported basis, the company recorded EPS of $1.45, compared to 30 cents in first-quarter fiscal 2017. Notably, the reported figure includes a one-time tax provision net benefit of $329.2 million, courtesy of the U.S. tax reform.

Revenues in Detail

Revenues grossed $791.1 million in the quarter, up 7.7% year over year (up 6.7% at constant exchange rate or CER). The top line also exceeded the Zacks Consensus Estimate of $787.7 million and the company’s guidance of $775-$790 million.

Solid contributions from Hologic’s Molecular Diagnostics, Breast Health and international business drove the top line.

Geographically, revenues in the United States grew 4.1% year over year to $597.2 million. Excluding blood screening and medical aesthetics, U.S. revenues declined 0.8%. International revenues were up 20.6% (up 15.8% at CER) to $193.9 million, banking on strong contribution from Cynosure. Excluding blood screening and medical aesthetics, international revenues increased 17.6% or 11.6% at constant currency.

Revenues at the Diagnostics segment (35.9% of total revenues) declined 12.5% year over year (down 13.5% at CER) to $284.6 million in the first quarter. Under this segment, Molecular Diagnostics revenues of $148.6 million increased 6.2% (5.3% at CER). The global growth at Molecular Diagnostics was primarily driven by an increasing market share and utilization of fully automated Panther system along with continued solid uptake of Aptima women's health products.

Cytology and Perinatal revenues of $123.4 million also showed a rise of 2.6% (up 0.9% at CER).

Revenues at the Breast Health segment (36.4%) inched up 5.4% (up 4.2% at CER) to $288 million. Revenues in the United States slipped 1%. In the reported quarter, changes in product mix were partially offset by increases in service and new product revenues. International revenues however climbed 29.2% year over year at CER.

Revenues from the GYN Surgical business (13.6%) were down 6.4% (down 7.1% at CER) to $107.5 million. Medical Aesthetic business in the quarter reported revenues of $91.3 million, determining 11.5% of total revenues. Revenues at Skeletal Health (accounting for the rest) decreased 6% (down 7.3% at CER) to $19.7 million.

Operational Update

In the fiscal first quarter, Hologic’s gross margin contracted 140 basis points (bps) to 53.7%. Adjusted gross margin also decreased 140 bps to 63.8% due to the divestiture of blood screening business and revenues from low-margin Cynosure products.

Hologic exited first-quarter fiscal 2018 with cash and cash equivalents of $664.4 million, up from $646 million reported at the end of first-quarter fiscal 2017. Total long-term debt was $2.76 billion at the end of the reported quarter compared with $2.62 billion a year ago.

During the quarter, the company generated operating cash flow of $169.1 million, compared with the year-ago cash flow of $169.6 million.

Guidance

Hologic has updated its fiscal 2018 financial guidance. The company currently expects adjusted revenues of $3.2-$3.28 billion, growing in the range of 3.9-6.5% compared with the previously provided range of 4-6.6% at CER. The current Zacks Consensus Estimate is $3.25 billion, within the guided range.

Adjusted EPS is expected to grow 9.4-11.8% to $2.22-$2.27 from the previously stated range of 3.4-5.9% to $2.10-$2.15. The current Zacks Consensus Estimate for adjusted EPS is pegged at $2.18, below the guided range.

Adjusted EPS is projected at 53-54 cents, reflecting an annualized growth of 6-8%. The current Zacks Consensus Estimate for second-quarter adjusted EPS is pegged at 52 cents, below the company’s guidance.

Our Take

Hologic posted better-than-expected results in first-quarter fiscal 2018 in terms of both earnings and revenues. Growth across all geographical regions buoys optimism. However, we are disappointed with the decline in revenues at the company’s Diagnostics segment. The blood screening divestiture is also likely to impede growth momentum for the company.

Zacks Rank & Key Picks

Hologic carries a Zacks Rank #3 (Hold).

A few better-ranked stocks that reported solid results this earnings season are PetMed Express PETS, PerkinElmer PKI and Becton, Dickinson and Company BDX. While PetMed sports a Zacks Rank #1 (Strong Buy), PerkinElmer and Becton, Dickinson carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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